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B06/1992 REDUCTION OF THE DEEMED RATE AND AUTOMATIC UPDATE OF FINANCIAL INSTITUTION ACCOUNTS INTEREST RATES
DATE OF ISSUE: 20 January 1992
REDUCTION OF THE DEEMED RATE AND AUTOMATIC UPDATE OF FINANCIAL INSTITUTION ACCOUNTS INTEREST RATES
The purpose of this instruction is to detail changes to the deemed rate on pensioner savings and the automatic update of interest rates on financial institution (FI) on-call accounts held by service pensioners.
2.On 8 January 1992, the Minister for Social Security announced that the interest rate under the deeming provisions would be reduced from 8% to 6% from 20 February 1992 for service pensioners (and 27 February 1992 for DSS clients).
3.The change in the deemed rate reflects the continuing fall in interest rates generally. To ensure that service pensioners get the full benefit of this fall in interest rates an automatic update of the bulk of on-call accounts held by pensioners in banks, building societies and credit unions will be undertaken at the same time.
FI INTEREST RATES DATA
4.A copy of the data used for the update will be provided to all Branch Contact Officers for information. (A list of contact officers is at Attachment A.)
5.The effective date for service pensioners affected by the reduction of the deemed rate and the FI update will be payday 20 February 1992.
WHO IS AFFECTED
6.It is estimated that upwards to 80,000 reduced rate service pensioner assessments nationally will be affected (of this 60,000 will be affected by the FI update only).
7.The new deeming rate applies to all moneys in excess of $2000 ($4000 per couple) held by pensioners in cash or on deposits with financial institutions. It also applies to bonds, debentures and loans made, as well as amounts gifted after 21 August 1990.
8.The FI update will be applied to all FI accounts held by pensioners which can be matched i.e. accounts with interest below and above the deemed rate. This is necessary as change to interest rates where the deeming rate does not apply (e.g. investments below $2000/$4000) will affect the pension rate.
EXEMPTIONS TO THE DEEMING PROVISIONS
9.Pensioners resident overseas and those in Medical Institutions which are still exempt, will have deeming applied on 19 March 1992.
10.Charitable and financial exemptions will be listed on a register which is being produced.
11.All affected pensioners who receive an increase will be provided with a simplified payment advice comprised of introductory paragraphs detailing deeming and FI change, payment details, appeals rights, plus a listing of all FI accounts and current interest rates held. Account numbers and balances will not be listed. A copy of the draft advice is attached (Attachment B).
12.Where two identical entries for account name and interest rate occur e.g Mr and Mrs Jones each have a Commonwealth Streamline account, only one entry will be listed on the advice.
13.One advice only will be sent per household, with payment details for each partner printed side by side. Where the payees are a married couple with 2 different addresses the joint advice will go to the veteran.
14.In addition, an information sheet will be included with each letter providing further information on deeming and the Financial Information Service (FIS). (Attachment C.)
15.In cases with fringe benefits change a payment advice will still be provided. However, Branch Offices will be required to recall or despatch cards manually. A schedule of affected cases will be provided immediately following the run.
16.The bulk of advices will be sent using a mailing house.
17.Advices for overseas cases where payment is arranged through Tasmania Branch Office will be referred to that office for mailing. Branches with overseas residents in payment will be provided with advices for despatch.
Manual Advices for Decreases
18.Because of the reduction in the deemed rate and the general drop in FI accounts interest rates, the expectation would be that any variation to pension would result in an increase. A decrease would indicate that the pensioner may have been underestimating the rate of return on his/her investment, and the case may require further investigation.
19.All decreases will be referred to the Branches for manual investigation and advice (it is anticipated that the number would be minimal). A schedule of cases where a reduction in service pension has occurred will be provided immediately following the processing run.
20.The timetable for the processing of service pension actions, and the deeming/FI update is as follows:
28 January 1992Cut-off for payday 6 February 1992
(Western Australia and South Australia)
29 January 1992Cut-off for payday 6 February (all other States)
Between these cut-off dates and the 3 February 1992 only cancellations and transfers out are to be processed.
31 January 1992By close of business processing of all cancellations and transfers out must be finalised (i.e. through interface). Incomplete cases will be frozen and will need to be reprocessed after the processing run on the weekend of
1-2 February. A schedule of "frozen" cases will be printed.
1-2 February 1992The deeming rate change and the FI update processing run will be carried out.
3 February 1992Normal processing resumes, however, effective date for reductions is 5 March 1992.
Daily advice letters produced after 3 February 1992 should be held in Branches until after the completion of the bulk mailout, estimated as 17 February 1992. Branches should not post these advices until Central Office clears their despatch.
12 February 1992Advices delivered to Australia Post.
21.To enhance the effectiveness of future FI updates the following evaluation mechanisms have been established:
.Telephone and Counter Enquiries. Statistics on telephone and counter enquiries will need to be collated manually for the period 17 February to and including 6 March 1992. At Attachment D is a pro-forma to be used for this purpose. Completed pro-formas should be forwarded to Peter Loiterton, PD&I, Central Office.
.PIRs. A special attribute, 100 (FI REFRESH), specific to this exercise has been allocated for the purpose of recording and collating information about PIRs received in response to the FI update. This atttribute will apppear at the top of the list of attributes on the CM.UA screen. Any PIRs received after 20 February 1992 which clearly stem from the update will need to be set under this "FI update" attribute. This will enable reports to be generated at a later date to determine number of cases varied, the $ amount of reductions/increases etc resulting from these PIRs.
22.Contact officers for the FI accounts update are Peter Loiterton in Canberra on telephone (06) 289 6412 and Oona O'Beirne in Sydney on telephone (02) 213 7771. Contact officers for deeming related aspects are Collette Woodford on telephone (06) 2896684 and Helen MacKinnon on telephone (06) 289 6426.
ATTACHMENT TO THIS INSTRUCTION
BRANCH CONTACT OFFICERS
NAME — POSITION — PHONE NO — FAX NO
NSW -Martin Doyle — SSO — 02/2137106 — 02/2812169
VIC -Ian Johnson — AM(IS)03/2846367 — 03/2846797
QLD -Tony Gormley — AD(IS)07/2238653 — 07/2238533
SA -Glen Trenwith — SSO — 08/2132414 — 08/2132412
WA -Bob Carr — IPO — 09/4258245 — 09/2213094
TAS -Mark Prouse — IPO — 002/216684 — 002/216602
LLOYD G JONES
MAY B JONES
123 ROAD ST
TOWNLAND NSW 2999
YOUR FILE NUMBER IS NX234567
Dear MR and MRS JONES
Pension Increase Because of Fall in Interest Rates
Recently financial institutions have reduced their interest rates on deposit accounts (savings, cheque, passbook and statement).
Because of the fall in interest rates the Government has decided to cut the assumed, or deemed, interest rate on pensioner savings from 8% to 6%. Information about deeming is provided on the attached information sheet.
Listed at the end of this letter are interest rates we now have recorded for your bank, building society or credit union accounts. Interest rates on your deposit accounts have been changed automatically for you.
Because of these changes your pension has been increased from 20 February 1992 to:
PAYMENT TYPEL.G. JONESM.B. JONES
Service Pension XXX.XX XXX.XX
Rent Assistance XX.XX XX.XX
Pharmaceutical Allowance X.XX X.XX
Disability Pension XXX.XX XXX.XX
TOTAL PAYMENT $XXX.XX $XXX.XX
Your Right of Review
If you do not agree with this decision to change your rate of service pension, you may apply to have it reviewed by a Delegate of the Repatriation Commission. The Delegate may decide the original decision was correct, or may decide to change it. If the decision is changed, your pension may be increased or decreased.
Any request for a review must be made in writing within three months of the day you receive this letter. Your letter should state the specific grounds for your request for review.
Your Accounts and Interest Rates%
Advance Bank Cash Plus Statement 9.5
Advance Bank Elevator 10.0
Australian and New Zealand High Performance 11.75
Australian and New Zealand Access 7.0
Australian and New Zealand Cash Management 12.25
Australian Resources Development Bank Savings 12.0
Brookvale Credit Union Notice of Withdrawal 9.0
Canberra Advance Bank Special Pension Advantage 8.0
Challenge Bank 7 Day Account 9.5
Commonwealth Savings Bank Security Plus 8.5
Commonwealth Savings Bank Streamline 9.0
Commonwealth Bank Keycard 3.75
Electricity Credit Union Savings 7.5
Greater Newcastle Building Society Access 5.0
Hong Kong Bank Savings 8.5
Macquarie Bank Savings 8.25
Metway Bank Home Loan Reducer 8.0
Metway Bank Savings Reviver 8.25
National Australia Bank Cash Management 10.0
National Mutual Royal Bank Mortgage Interest Saver 9.0
SA Public Service Savings & Loans Society 30 Day At Call 7.5
Shoalhaven Paper Mills Employees Credit Union Savings 6.5
Westpac Banking Corporation Advantage Saver — NIL
Westpac Banking Corporation Cash Management 11.25
Westpac Banking Corporation Club 55 10.25
Changes You Have Already Told Us About
If you have told us recently about a change to your income, assets, or your domestic situation, it may not have been included when sending you this letter. If this is the case, we will be sending you another letter as soon as the change has been actioned.
Why be Deemed?
What is deeming?
Deeming means that service pensioners with more than $2000 (or $4000 for a married couple) in cash or deposited in bank, building society or credit union accounts will be assumed, or 'deemed', to be getting 6 per cent interest if they are receiving less interest than this. A total of $2000 ($4000 for a couple), cash or deposits are exempt from this deemed interest and will be assessed at the actual interest rate being received. Naturally, interest over 6 per cent will continue to be assessed at the actual interest rate being earned.
Did you know?
There are many accounts available from banks, building societies and credit unions which offer at least 6 per cent interest. You will be better off if you get at least 6 per cent interest because the extra interest you earn will always be more than any pension you lose, even if you pay tax.
So, why allow interest to be deemed?
That is, why put your money in an account which gets less than 6 per cent interest and then have interest assumed, or 'deemed', at 6 per cent? Your bank, building society or credit union can advise you:
.how to take advantage of the higher interest rates which are available;
.which account may be best for your needs.
After all, it is to your advantage to get more total income. Getting more income but less pension also eases the burden on tax-payers.
Need more help/
.your Department of Veterans' Affairs office; or
.the Financial [Information Service (see over) at the Social Security office nearest to where you live.
Financial Information Service (FIS)
What is FIS?
FIS is the Financial Information Service, a free information and advice service available to Social Security clients and service pensioners.
What can FIS do?
FIS can help you improve your standard of living by providing you with advice on:
.the advantages and disadvantages of different types of investments,
.the effect of investment decisions on pension;
.involved aspects of the Income and Assets tests;
.basic taxation matters.
FIS Officers will not recommend particular investments or actually make investments for you.
How do you get in contact with FIS?
FIS operates out of the Department of Social Security. You can get in contact with FIS by enquiring at the nearest Social Security office, or by calling free of charge the Social Security Hotline :)n:
008 060123 (Metropolitan)
008 112468 (Country)
Your local Veterans' Affairs Office can also arrange for a referral to FIS on your behalf.
Service Pension, Disability Pension, Treatment Advice
Of course, for information about disability pensions, treatment, or service pension eligibility and/or assessment you should still contact your local Veterans' Affairs office.
PHONE & COUNTER ENQUIRIES
FI ACCOUNTS INTEREST RATES
TYPE < 5101530 > 60TOTALY/N
why the update?
what has taken
are arrears payable?
interest % wrong
deeming - why/what?